Mortgage base rates consolidate upward trend


A summary of the Latest Euribor and Spanish mortgage news

Euribor (12 months), the interest rate mainly used to calculate mortgage payments in Spain, has now risen for 3 consecutive months, consolidating a steady trend upwards. The last time it rose for 3 months on the trot was back in July 2008, when Euribor peaked just before the credit crunch got underway.

Having risen 2.6% in June compared to the previous month, Euribor now stands at 1.281%, the highest level since last September.

Despite rising for 3 months, Euribor is still not far above the record low of 1.215 it hit in March. It is still 20% lower than it was a year ago, and 76% lower than it was in July 2008.

Because Euribor is still lower than it was a year ago, repayments on a typical annually resetting mortgage (150,000 Euros, 25 years) will fall by around 25 Euros/month, or 300 Euros/year

If Euribor keeps rising, borrowers will soon start seeing their monthly payments increase, albeit modestly at first. Repayments could start rising as early as September.

Euribor is an interbank lending rate based on interest rates set by the European Central Bank (ECB). Base rates are currently at 1% but the ECB is expected to put them up during the course of 2010. Even though base rates haven’t yet been touched, Euribor is starting to rise as banks get nervous about the state of the economy and lending to each other.


New mortgage lending

New residential mortgage lending rose just 0.2% in April compared to the same month last year, according to figures from the National Institute of Statistics (INE). Having risen by more than 2% for 3 consecutive months, this might be a sign that growth in new mortgage lending is petering out.

On a monthly basis there were 50,342 new mortgages signed in April, down 5.9% compared to March, so on a month-on-month basis, the news wasn’t good either.

The average loan value was 114,132 Euros, a fall of 1.1% compared to last year, and 1.9% compared to the previous month.

Overall new residential mortgage lending was 5.7 billion Euros, down 1% on last year.

The average interest rate was 3.92, 16.8% below a year ago, but 0.3% up on March.

More than 95% of new mortgages were variable rate

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